When is advice too expensive? Lately it seems that budget constraints and other related factors are compounding the “logic” of saving money by not obtaining expert advice. For instance, one company with whom I consulted had invested over $100k in redesigning its accounting system to be compliant with federal funding requirements, and then decided to modify the system again. There were several problems with doing a second redesign in a one-year period—audit implications being the biggest—the person overseeing the new design had no government compliance knowledge or experience.
When the revisions were reviewed for compliance, it was determined that the organization was no longer compliant with requirements—for the entire year! Talk about putting your organization at risk! The auditors, to say the least, were not happy. Perhaps leadership could have known that there were issues when the person doing the second redesign stated “I don’t have time to ask questions on what it should do. I have to redo this all over again, so I can’t take the time to discuss the requirements. I will get back to you when I have it redesigned.”
Wow! Is it more affordable to have your employees or a consultant that is not qualified “busy” doing things when those things are not right? If you don’t have time to do things right the first time (or in this case the second), what is the cost to your organization in redoing it, and in this case putting your ability to collect payment from the government and even the ability to do business with the government at risk from being non-compliant.
Does this seem logical to you? You are in hurry on a tight budget and have already “redone” the system once incorrectly. What is then likely outcome of doing another redesign blindly, without qualified guidance and comprehension of the requirements? The strategy seemed to be “hurry up and spend time and money and guess” rather than investing a small amount time and money on understanding the requirements and then taking action. If there’s no time or money to waste … why keeping guessing and redoing a project?
Too many organizations are concerned with the price tag that is being paid for qualified service providers (e.g., CPAs, attorneys, compliance specialists) than the cost the organization will face when they do it wrong. Would you spend $100,000 to ensure that you are eligible to keep $5 million in funding? If you were asked to spend $100,000 acquiring a customer that would make you $10 million over the life of the customer, is that a good investment? If you spend $100,000 (employee salaries) of employee time doing and redoing a project incorrectly, and have government auditors come in and fail you on compliance— which results in your organization not only not getting paid for your work, but also having to repay the funds you received plus interest and penalties—then how expensive was it to not pay for qualified advisors to work with you? It could cost you your business!
Here are a few key things to keep in mind when working on complex technical, compliance or other business matters:
- What is the cost of getting it wrong?
- How much time will it take a qualified experienced advisor to do the work versus having an unqualified and/or inexperienced staff member (or less expensive advisor) do the work and:
- Get inferior results
- Take longer to do the work
- Have to repeat, correct, or redo the project more than once
- Miss opportunities to use valuable resources on other priorities (what could those team members be doing if they weren’t redoing (again) work already done once incorrectly
- Risk payment, penalties, interest, and ability to pursue future projects.
- What is the long-term impact to the following areas of your business if things aren’t addressed correctly?
- Competitive position
- Intellectual property
In the example above, the issues dealt with compliance with government regulations and with full knowledge that an audit would be happening, but failure to “get it all right” could result in something else. It could be a defective patent or trademark filing, where you end up in court and find that your intellectual property is not protected. It could be that when you hire an independent contractor, you failed to put the right agreement in place and find the Department of Labor and the IRS later deciding this person was an employee; then you’ll face failure to withhold taxes, failure to provide benefits and other labor-related issues.
You may not think it is important today to invest in qualified advisors. But what will the price be tomorrow when you find that the cost to fix the issue is higher than you can afford?
Author: Lea A. Strickland, MBA CMA CFM CBM GMC
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